Campari triumphs despite negative currency translation

Strong brands such as Campari, SKYY and Cinzano helped Italian drinks group Davide Campari increase its sales in the first half of 2003 even after the negative effect of currency translation.

Campari, the Italian drinks group, has reported double digit sales growth in the first half of the year, helping it improve even after the impact of currency translation.

Sales for the six months to 30 June were up 16.7 per cent to €332.7 million at constant exchange rates, although the currency translation effect meant that reported sales growth was around half that at 8.5 per cent.

Organic growth, at constant exchange rates, was 10.7 per cent, with the remainder coming from a new distribution agreement in the US for the Tequila 1800 brand.

Operating profit was up 16.8 per cent (or 6.1 per cent in real terms) to €56.9 million, but net profit fell by 12.6 per cent (or 5.2 per cent on a constant basis) as a result of a higher tax burden. In the first half of 2002, the company had benefited from several tax reductions.

Spirits sales reached €217.8 million during the half, Campari said, up 23.6 per cent at constant exchange rates and 11.6 per cent including the impact of currency translation. Organic growth of 14.2 per cent at constant exchange rates was helped by good performances from CampariSoda (+2.1 per cent), Ouzo 12 (+14.5 per cent) and Jägermeister (+3.9 per cent).

The Campari brand's growth was 1.5 per cent at constant exchange rates, although sales dropped by 5 per cent after taking into account currency translation, mainly because of the importance of the brand in Brazil, where volumes grew but where the devaluation of the Real took its toll on revenues. As well as Brazil, Campari performed well in Italy and Germany, with sales recovering slightly in the latter market after several years of decline.

Sales of Campari Mixx, the new pre-mixed spirit drink launched last year, benefited from the expansion of distribution in Germany and Austria and from the introduction of the new Campari Mixx Orange line extension on the domestic market, Campari said. The company's flagship RTD brand has lived up to the company's high expectations in the months since its launch, meeting all its sales targets in Italy and showing particularly strong growth in the second quarter.

The group's premium vodka brand, SKYY, also continued its upward trend of the last few quarters, with sales rising 27.1 per cent the half at constant exchange rates and 4 per cent at actual exchange rates. The new flavoured vodkas launched in March 2003 (SKYY Berry, SKYY Spiced and SKYY Vanilla, which joined the existing SKYY Citrus) continued their upward sales trend, accounting for around 15 per cent of total brand sales in the first half.

Like many other leading spirits producers, Campari is also stepping up its presence in the wine market in a bid to leverage its global distribution and brand marketing abilities. Not that Campari is a complete newcomer to the wine sector - its fortified wine brand Cinzano has been around for many years, and sales rose by 13.3 per cent in the first half due to the roll out of the brand in a number of eastern European markets.

Total wine sales rose by 9.7 per cent to €36.4 million at constant rates (6.7 per cent in actual terms) helped not only by the boost in vermouth sales but also by good performances from Sella & Mosca wines (+2.8 per cent) in the domestic market and by Cinzano's sparkling wines in both Italy and Germany (+7.54 per cent at constant rates). Campari recently lifted its stake in Sardinia-based Sella & Mosca to 98.2 5 per cent.

As for soft drinks sales, they rose by 5.6 per cent during the half despite a poor start to the year. Thanks to favourable climatic conditions - the heat wave which hit most of western Europe in July and August - Lemonsoda, Oransoda and Pelmosoda grew by 9.9 per cent while Lipton Ice Tea sales rose by 8.6 per cent. Crodino, whose sales are less closely correlated to climatic variations, nonetheless saw sales rise by 3.4 per cent.